Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Current ratio (CA) or working capital ratio
CA = Current assets/Current liabilities (times)
Current ratio measures the short term solvency or liquidity; it signifies the extent to which the claims of short-term creditors are covered by assets. Current ratio is basically looking at the working capital of the company. Effective management of working capital ensures that organisation is running efficiently. This will ultimately result in increased profitability and positive cash flows. Effective management of working capital involves low investment in non-productive assets such as trade receivables, inventory and current account bank balances. Also maximum use of free credit facilities such as trade payables ensures efficient management of working capital.
Normal current ratio is around 2:1 however this varies within different industries. Low current ratio may indicate insolvency. High ratio may indicate not maximising return on working capital. Valuation of inventories would have an impact on the current ratio, as will year end balances and seasonal fluctuations.
The use of ratios
We will now look at some of the working ratios in detail and illustrate how they can be interpreted.
Introduction - Overview of the business idea. A clear outline of what you intend to present and why you are presenting it in your chosen method or style Business Plan A clear
appraise the Baumol''s sales revenue maximization theory as an alternative objective of the firm o
You decide to max-out your annual investment into your Individual Retirement Account and invest $6,000 at the end of each year for the next 17 years. At the end of this investment
Q. What is Over-capitalisation? Over-capitalisation This is the opposite of over trading. It means a company has a large volume of inventories, cash balances and trade re
A company's current assets are less than its current liabilities. Company issues new shares at full market price. What will be the effect of this transaction upon company's work
If an MBA cost $35,000 and money can be invested to earn 7 percent, how much does the annual salary for a person holding a masters degree have to exceed that of other college gradu
Question 1: (a) As a small island economy , Mauritius had to face a number of constraints in order to transform itself from mono-cop economy into a well diversified midd
The Citilink Bus Company ("Citilink") was established in 2000 to operate a bus service across a city with 1 million inhabitants. The bus company was created by an indigenous busin
Gabi wishes to purchase an apartment in Berea Johannesburg which is situated in a quiet street. The purchase price, including costs, is R355 000 and she wishes to obtain a 100% mor
Question 1: a) What do you meant by equilibrium National Income and to what extent is economic growth beneficial to an economy? b) Explain using both diagrams and mathemat
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd